How to Get Out of Debt - Do Not Forget Your Savings
When it comes to paying off debt, many individuals take the approach of throwing as much money as possible at their debt in order to eliminate it as quickly as possible. While there is nothing necessarily wrong with this, it is also important for a person to keep in mind that having some savings set aside is crucial if they should ever find themselves out of work, facing a medical emergency, or simply strapped for cash unexpectedly. Just about every financial expert will stress the importance of having at least a small rainy day fund at the ready.
Most experts will recommend that a person set aside 10 to 15% of their income every month for their retirement. This is an excellent goal but an individual trying to get out of debt may not have the luxury of setting such a substantial sum of money aside. While cutting spending and paying off bills is crucial to living debt-free, that does not mean that a person should completely give up on the idea of saving altogether until they are out of debt. Even if it is a small amount, it is still important to set something aside regularly.
The importance of having money in savings is difficult to overstate. Because unexpected occurrences befall everyone, having money to fall back on rather than going further in debt to cover unexpected expenses is crucial to getting out of debt and staying out of it. Without a little extra money to use, a person may find that they have no other choice than to borrow money from a bank or use high-interest credit cards. Whether a person find themselves needing extra money because they have lost their job or are facing unexpected repair bills, having interest-free money that they can use is always better than the alternative.
In order to determine exactly how much money a person can comfortably afford to set aside every month it will be necessary for them to take a good hard look at their income and expenditures. Saving money should not come at the expense of paying down debts. A person who has very little wiggle room when it comes their budget may find that they have only a few dollars every week that they can afford to set aside. Rather than being discouraged by this small amount savings, a person should keep in mind that even a little bit of money in savings is better than nothing.